Member of the European Commission responsible for Agriculture, Rural Development and Fisheries

Opportunities and Challenges for Slovak Agriculture on the Way to Accession

Seminar "Agriculture of the Slovak Republic and Accession to the EU"

Nitra, 29 November 2001

Minister Koncoš,

Ladies and Gentlemen,

I am very pleased to be with you at this seminar today. Although this is my first visit to Nitra, I have to say that I feel very much at home here. This agricultural metropolis is for me as the European Commissioner for agriculture a good place to visit. The agricultural university, the organisations and the famous Agrokomplex Fair, all these elements make Nitra an ideal place for an exchange of ideas and experiences. I therefore want to thank the Research Institute of Agriculture and Food Economy (RIAFE) and the Agroinstitute Nitra for organising this event.

However, it is not just the agricultural institutions that make Nitra a good place to talk about the preparation for enlargement. Take a look at the famous diocesan library with its thousands of books and you will see that Nitra is also a symbol for the European cultural heritage. Let us take this library as a reminder that enlargement is not just about negotiating legal and economic issues, but that the real basis of enlargement are our common values. Even if there are many difficult tasks ahead of us, enlargement has a solid basis to build on.

In my speech today,

I first would like to speak about where we stand with our enlargement project.

Secondly, I will point out how close Slovakia and the EU have become in terms of agricultural trade.

Thirdly, I will discuss the Sapardprogramme.

Ladies and Gentlemen,

since my last visit to Slovakia, your country has made tremendous progress. In the wake of the last elections, Slovakia was admitted to the second group of accession countries in 1999. In the meantime, your country has caught up in many respects with the frontrunners, and today it counts amongst the candidates that are most likely to join the European Union first. This is mainly due to the efforts of the Slovak people, who have opened up politically and economically to the European Union.

Today, Slovakia is not only a neighbour of the European Union. Given its imminent accession to the Union, we are real partners. This partnership could also be seen at the WTO meeting in Doha two weeks ago. As the negotiator for agriculture for the EU, I was pleased that Slovakia has supported the EU's position, and I would like to thank you for that. We can see already today from the successful outcome we achieved in Doha that our partnership makes us stronger, and it creates bigger opportunities for both of us.

1) Enlargement

Let me move on now and answer the question where we are in the enlargement process: Just two weeks ago, the European Commission published a number of important documents regarding enlargement: the strategy paper and the regular reports on each of the candidate countries. The Strategy paper not only confirmed the road map for the remaining negotiation chapters. In addition to this, the Commission has committed itself to proceed quickly with all of its outstanding draft common positions so that the member states can then agree on their negotiating position. Furthermore, the Commission declared that in next year's regular reports, it will give its recommendations on which candidates it considers ready to join the Union. As you can see, we are getting closer to enlargement.

As for the regular reports, the report on Slovakia has stated that there has been progress on several fronts. The Parliament has adopted a new constitution which prepares Slovakia for accession and strengthens the democratic institutions. Furthermore, there has been progress regarding macroeconomic stability, the functioning of your market economy and the adoption of EU legislation in several sectors such as the internal market, social policy and the energy market.

Unfortunately though, progress in the agricultural sector has been very limited. The question of land ownership is still not solved. The restructuring of the farms has to continue. Moreover, your efforts to establish an Integrated Administration and Control System should continue so that it is operational by the time of accession at the latest. I cannot stress enough the importance of this instrument. Without it, most of the measures of the CAP don't function, and the related funds cannot flow.

We opened the agricultural chapter with Slovakia half a year ago, and we are committed to continue to follow the road map for these negotiations . It is also clear, however, that the negotiations are conducted by the candidate countries and the member states of the EU.

In accordance with the road map, we have split the agricultural chapter into two parts. Currently we are dealing with all issues without major budgetary implications, such as veterinary and phyto-sanitary questions as well as many technical agricultural elements . Early next year, we will address the remaining issues. There are essentially two open questions: the reference periods for our supply control measures and the question of direct payments.

Regarding the first question, it has to be clear that we cannot accept quotas on the basis of production potential. Just like in our Member States, quotas have to be based on historic production. As for the question which period in the past we should take, the communist period is ruled out, as are the first years of transition. We will therefore have to find a compromise on the basis of more recent years, taking into account also consumption and WTO restrictions.

The second question concerns the introduction of direct payments. All candidate countries including Slovakia have asked for the introduction of direct payments at the full level with the first day of accession. However, immediate introduction of the full direct payments is not envisaged. Such sudden introduction would not only cause market and land price distortions; it would also freeze the current farm structure, thus blocking the necessary restructuring. However, I stick to what I have said many times before: in the medium term, there cannot be a two-tier CAP. The Common Agricultural Policy has to be common indeed. In the short term I believe that we should do more to assist the necessary restructuring, by intensifying our rural development measures in the new member states.

Second: Trade

Ladies and Gentlemen,

Even ahead of enlargement, our countries are growing together. This can be seen clearly in our mutual trade figures. Over the last five years, our bilateral trade volume has more than doubled. In 1995, it amounted to 237 billion Slovak Crowns [€ 5.5 billion] . Last year, it has reached 548 billion Slovak Crowns [€ 12.7 billion], and this increase has been equally distributed between both sides. As you can see, trade is not a zero sum game, but both sides can profit.

As far as agricultural trade is concerned, however, the development has been less dramatic. EU exports of agricultural goods to Slovakia have risen by scarcely 50% over the last five years, while Slovak agricultural exports to the EU have increased by only 36%. It is clear that there is a big potential for increased trade between our countries, which is why we have concluded the so-called "double zero" trade agreements. These agreements, which entered into force on 1st July last year, open up farm trade in a smooth, step-by-step way, through developing trade flows on which neither duties nor export refunds are paid.

At the same time, we are aware that the Slovak agricultural sector needs time to adapt to the new market situation. Therefore the EU has made greater concessions for Slovak exports than vice versa. As a consequence, 78% of EU imports of agricultural goods from Slovakia enter the Union totally free of duty today. In the other direction, 66% of the EU's agricultural exports to Slovakia enter your country free of duty.

So far, so good. But what does this percentage mean in absolute terms? I have just received the results of our first year of double zero trade, and as we had expected, both sides have further increased their trade. At first glance, however, the results for Slovakia seem to be less positive than for the EU. Slovak agricultural exports to the EU have risen by only 3 %, compared to an increase of 20% on the EU side. However, we must take into consideration one important fact: The Slovak Republic has unilaterally put a halt to its exports of animal feed as a safeguard measure last year. We can hardly blame the double zero agreement for this unilateral measure. On the contrary, such unilateral measures run counter to the idea of double zero. If we therefore exclude this sector from our analysis, we can see that the rest of your exports have risen by 22%! In fact, the double zero agreements have been a success for both the EU and Slovakia.

However, last year's agreements were only a first step. We have to keep in mind that from the first day of enlargement, there will be no trade barriers at all. No duties, no quotas. In order to avoid a shock for our producers and the agro-business, we have to open our trade in a harmonious way. The double zero agreements are an ideal tool for this kind of preparation. This is why we are currently preparing a second round of trade negotiations, which I will call, for obvious reasons, "double profit" negotiations. There is no time to lose. We have reached a late pre-accession phase, and therefore we should proceed with the opening of our markets.

Opening our markets will not only increase our mutual trade, but it will also lead to more competitiveness on both sides. The European Union could soon be a market with nearly 500 million consumers who are willing to pay good prices for quality goods. This is a big opportunity.

However, if Slovak farmers want to seize this opportunity, many changes are still needed. Slovakia should continue and reinforce its efforts for its restructuring programme at the farm level. At the same time, it is absolutely crucial to introduce the same veterinary and phyto-sanitary standards as in the EU. I am glad that Slovakia has made considerable progress in the veterinary issues over the last year, and I hope that more progress will follow in the phyto-sanitary field. Respecting these standards is a precondition for a competitive food processing industry. And a competitive food processing industry is the best way to achieve a prosperous agricultural sector.

One thing should be clear: The restructuring of your agricultural sector and the upgrading of your food processing industry is not something that the EU imposes on you. Even without enlargement, these changes would be necessary.

Globalisation, membership of the WTO and the increasing liberalisation of trade mean that even if you had not decided to join the Union, you would face modern competition. The consumers in your countries, just as in the current European Union, have very high expectations regarding food quality and food safety, and quite rightly so. The more you adapt your production and processing industry to these expectations, the more you will succeed on both the Slovak and the European market. However, as a future Member, you need not carry out all the necessary changes alone. The EU is helping already through overall co-operation and its support programmes PHARE and ISPA. In addition to this, we have set up the Sapard programme. This leads me to my third point.

3) Sapard

Sapard is designed to support your necessary restructuring and modernisation efforts in agriculture and the rural areas. Through this programme, we have allocated 804 million Slovak Koruns [€ 18.6 million] per year for each year from 2000 and onwards. Money not spent in the early years is not necessarily lost. In particular the allocation for the year 2000 may be spent until the end of 2003.

I am fully aware that many people in the agricultural sector of Slovakia are disappointed by the lengthy adoption procedure of Sapard and frustrated that the Sapard money is not flowing yet. However, those who are complaining underestimate the complexity of the exercise.

One has to keep in mind that Sapard is not just another EU-programme for third countries. It is the first programme ever that is fully administered by non-EU countries. Therefore, it is absolutely essential to set up an administrative structure that guarantees the optimum use of the Sapard funds. This follows essentially the same procedure as the rural development programmes in our current member states. Like the candidate countries with Sapard, member states are responsible for the appropriate use of the EU funds for the rural areas, and this requires impeccable administration. What we ask from the candidate countries is therefore equivalent to what we ask from our own member states.

In this complex process, a lot has been done already. Last year, Slovakia submitted its Sapard plan, which was approved by the member states and adopted by the Commission on 17 November 2000. This year, both the multi-annual and the annual financing agreements were signed. Now, we have almost reached the last stage. On behalf of the Slovak authorities the National Authorising Officer has to accredit the Sapard Agency and the relevant part of the National Fund. This step is of key importance, since by this decision Slovakia signals that it is ready to administer EU funds in accordance with our EU standards.

Understandably , many technical problems have emerged on the Slovak side this year, which has delayed things. The same has occurred in a number of other countries. My staff report me that there has recently been an improvement in co-operation between the various parts of the administration in Slovakia. I appreciate that, since I am sure that this co-operation will play an important role in making progress with the work. The ball is in your court, since we are awaiting the national accreditation of your Sapard system. There is a strong possibility that this phase could be achieved by the year end or soon afterwards. However, we do not expect you to rush this important step, now that you are so close to the end of your preparations. It is far better for your authorities to be confident that they are really ready, than for our auditors to have to draw attention to weaknesses in your preparation.

Then, we must evaluate your national accreditation, and if the evaluation is positive, we can give the green light and the money can start to flow. I very much hope that this can be achieved early in the Spring.

On our side, I can assure you that, once you have finished your accreditation , my staff are ready to carry out the last steps as fast as possible.

Finally, let me remind you that the preparatory work for Sapard that you are doing now pays off not only for the programme itself. It is also an extremely valuable preparation for the instruments of the Common Agricultural Policy and in particular for your future management of rural development funds. Therefore, all that you are doing now will definitely pay off from the day of enlargement onwards. .

Ladies and Gentlemen,

We cannot wait until the day of enlargement to bring our policies and legislation in line. If we want to avoid a shock for our respective agricultural sectors, we have to get prepared well ahead of accession. This is why tools such as Sapard and the double zero agreements are so important.

I count on your patience, co-operation and on your willingness to continue your efforts, to make enlargement a success for all of us.